Murphy Oil Feels the Heat As Dan Loeb Starts Applying Pressure

We just broke the news about Dan Loeb’s stake in Murphy Oil Corporation (NYSE:MUR) yesterday, and his solid interest in expanding that holding in the future. Loeb is now interested in shaking up Murphy’s business through spin offs that could improve the pricing of Murphy Oil Corporation (NYSE:MUR) stock by 60 percent, as he predicts. Murphy Oil has spoken up and replied to the concerns raised in Third Point‘s Q3 letter to the investors. The company is talking to its other shareholders about how to go about it. In a statement Murphy’s Chairman Claiborne Deming, said:

“The Board and management have been working to evaluate opportunities to illuminate the value in our stock price for the benefit of all of our shareholders.”

Asset sales have been on Murphy’s mind for some time now. The ex-CEO, David Wood, had recognized the advantages of such spin offs, and had said earlier this year, that they were looking into it. The new CEO, Steven Cosse said that such measures would take some time to implement.

“In the United States, we regard our retail business as a very good business. However, the question remains whether it stays part of Murphy or whether it continues its growth as a stand-alone held directly by Murphy shareholders,” Cosse said, in an August conference call. “That’s the decision to be made, but before we get to that decision, I have to say that we have to understand and address some of its underperformance it has sustained here recently.”

Third Point’s letter calls for four “easy steps” that, if implemented, could help the “lagging” Murphy Oil Corporation (NYSE:MUR) share price. The foremost of these is spinning off the retail business, which comprises 1100 fuel stations. Loeb calls the business a “sentimental attachment”, and a non-strategic asset, as it does not improve the enterprise value. Secondly, the letter emphasizes on the sale of Canadian Natural gas assets. It cites the example of EnCana Corporation (NYSE:ECA) which underwent similar asset sales in Western Canada. Such sales could add $15 per share to MUR’s stock. Other steps that could achieve a share price boom are selling the stake in the Syncrude Oil Sands Project and exiting the UK refining business completely. The letter mentions that Syncrude sale could bring $2.6 billion to the company and give the stock a boost of $13.

Murphy Oil is trading at 58.91, up 1.2 percent from previous closing price of 58.21, on Wednesday.